Rural Internet Access is Tough

Any reasonable observer would say that a 1 Mbps internet access speed costing $80 a month is less than adequate, as it costs in Fort Yukon, Alaska.

The problem is that current solutions to boost access speed are not commercially viable, owing to geographic isolation and the small number of potential users.

Fort Yukon has a total population of 547, and is served by three internet service providers (one using satellite, one using fixed wireless, one using digital subscriber line).

There are an average of 2.6 persons per home, implying a total of 210 homes, of which 38 percent are occupied seasonally. Some estimates suggest full-year occupancy is 40 percent.

So assume full-year occupancy is about 62 homes to 84 homes are the universe of home broadband services.

Assume 62 percent of homes buy internet access. That implies a universe of 38 to 52 potential customers. Recall that Fort Yukon is isolated. Fort Yukon, located northeast of Fairbanks, is not served by the GCI TERRA network.

source: GCI

Terrestrial for Every Rural Region in Alaska (TERRA) project, a 3,300-mile rural high-speed broadband network delivering high-speed broadband access to 45,000 Alaskans in 84 communities that are spread across an area the size of Texas.

That means the only backhaul is by satellite, with all that implies for cost and capacity, in a region with very low population density. The estimated cost of building a mile of optical fiber middle mile facilities is $120,000. Microwave middle mile might cost $26,000 per mile. While fiber middle mile might support 10 Gbps, microwave might support less than 1 Gbps.

It is at least 138 miles from Fairbanks to Fort Yukon. Low earth orbit satellite constellations eventually will be a viable solution for middle mile, but not using terrestrial facilities. A microwave connection could cost $3.6 million. A fiber line might cost $16.6 million.

There is no payback model, using terrestrial facilities.

Some Industry Professionals Believe Connectivity Will be Less Important in 5 Years

One always should be on the lookout for anomalous data. So it is with a survey of 550 industry executives from 11 countries, conducted by Osborne Clarke for The Economist Intelligence Unit. Note that executives in the digital business, energy and utility and financial services verticals say they believe “connectivity” will be less important in five years.

Conversely, professionals in real estate/infrastructure and transport/automotive industries believe connectivity will be more important in five years. So what to make of those results? Some argue that real estate and transport traditionally have been slower adopters of information technology.

Also, financial services and digital businesses have been early adopters.

source: The Economist Intelligence Unit

The results might also indicate that, in some industries, connectivity itself is less an issue, while other elements of business success are viewed as more significant.

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Is 5G as Big as the Internet?

Is 5G going to be as big an innovation as was the internet? It is too early to tell. But here’s an exercise, taking a range of claimed Internet benefits and simply substituting the word “5G.”

“Unlike its predecessors though, Internet is a technological paradigm shift, akin to the shift from typewriter to computer. And it isn’t just a network. Internet will become the underlying fabric of an entire ecosystem of fully connected intelligent sensors and devices, capable of overhauling economic and business policies, and further blurring geographical and cultural borders. It will be capable of delivering at every rung of the ecosystem’s ladder, and will provide seamless, continuous connectivity for business applications.”

source: OECD

• “5G will be a fundamental shift in the way communications networks are managed and operate; a marked distinction from previous mobile generations
• 5G is no longer just about communications, but connectivity solutions. Data rate and capacity have traditionally been key metrics, but Internet significantly improves other metrics such as latency and coverage. This allows enhanced connectivity for a much wider range of applications across all sectors and industries.
• Major mobile operators will have to focus on an expanded value chain to sustain high growth, while key players from other sectors will find themselves integrated into the wider telco industry.
• 5G will become a universal connectivity platform, and will have a profound impact on the way devices and people communicate and interact.”

1. “5G will turn connectivity into a platform. With Internet, wireless access networks will go beyond pipe, providing seamless, ubiquitous, and limitless connectivity for all people and all things.
2. Everything will go 5G. Right now, most things are offline by default, and most electronic devices are not connected. With 5G, being online and connected will become the default for everything.
3. The world will go all cloud. Supercharged with 5G, the cloud will provide massive computing power with instant transfer speeds and near-zero lag. This will make intelligence on demand available for everyone, everywhere. New business models like Cloud X – where devices are boosted by inexhaustible cloud-based resources – will begin to emerge.
4. Devices will be redefined. With AI support across devices, network, and the cloud, devices will go from plug and play to plug and think. They will understand users better – able to actively predict our needs, not just passively respond to commands – and interact with us in more natural ways.
5. Experience will flow seamlessly. With existing networks, our online experience is fragmented from one scenario to another. When all things are 5G and cloud-based, experience and content will flow seamlessly through time, space, and devices for a truly holistic experience across all scenarios.”

The point is that many potentially huge innovations, such as internet of things, artificial intelligence, virtual reality and autonomous vehicles are enabled by a complex of technologies and platforms. Internet is part of that complex, but ultimately just a part.

That is not to say 5G will fail to play a role in creation of a big new platform for apps, services, use cases and revenue models and sources. But separating the impact of 5G specifically, from all the other important changes, is a perilous exercise.

The internet itself, AI, VR, semiconductor advances, use of millimeter wave spectrum, device advances or other technologies might play key roles. Or not.

The big point is that all the incoming innovations likely are not solely driven by 5G. If successful innovations happen, they might not even require 5G. It just is impossible to say, right now.

Are Telecom Prices Too High?

One argument we always hear about any communications service is that it is “too expensive.” That clearly is true in developing or lesser-developed nations, where mobile internet access can cost 14 percent of gross national income per person. In developing markets, mobile internet access can cost about six percent of GNI, per person.

Consider mobile internet access. In developing countries, mobile internet access costs about 0.7 percent of gross national income, per person, according to International Telecommunications Union data.

source: ITU

Much the same story holds for fixed network internet access as well. Fixed network internet access in developed nations costs less than one percent of GNI per person, perhaps 11 percent of GNI per person in developing nations and as much as 30 percent of GNI per person in lesser-developed nations.

source: ITU

One rather impressionistic bit of evidence that prices are not excessive might be gleaned from industry profits. On a global basis, revenues dropped by about four percent between 2014 and 2015, for example.

Developed market revenues have been dropping since about 2012, according to ITU statistics.

 

source: ITU

Half of Global Fixed Lines Support Internet Access

In 2017, about half of all fixed network lines globally supported voice. The other half (the growing half) consisted of internet access lines, according to International Telecommunications Union data.

Fixed Network Lines, Voice and Broadband, Lines in Millions
	2014	2015	2016	2017*
Fixed-telephone subscriptions
Developed	503	490	479	471
Developing	592	556	524	500
World	1,095	1,046	1,004	972
LDCs	9	8	9	9
Fixed broadband subscriptions
Developed	354	370	382	392
Developing	377	472	535	588
World	731	842	917	979
LDCs	5	7	8	10
Total Lines
Developed	857	860	861	863
Developing	969	1028	1059	1088
World	1,826	1,888	1,921	1951
LDCs	14	15	17	19
Percentage Broadband Lines
Developed	41%	43%	44%	45%
Developing	39%	46%	51%	54%
World	40%	45%	48%	50%
LDCs	36%	47%	47%	53%

source: ITU

That illustrates one key facet of fixed network business models: increasingly, the fixed network is a platform for internet access, less so voice. The other trend is that more of the value of the fixed network is being generated by a range of data services including wholesale and retail lines, as well as services for enterprises.

source: TRAI

source: TRAI

source: TRAI